Bergeron v. Payne
Filed 7/25/13 Bergeron v. Payne CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
MERLIN LEE BERGERON,
Plaintiff and Appellant,
v.
CLIFTON
PAYNE, SR.,
Defendant and Respondent.
D060553
(Super. Ct. No. 37-2010-00090076- CU-BT-CTL)
APPEAL from
an order of the Superior Court
of
County, Jay M. Bloom, Judge.
Affirmed.
Archer
Norris, W. Eric Blumhardt and Pamela G. Lacey for Plaintiff and Appellant.
Lewis
Brisbois Bisgaard & Smith, Jeffry A. Miller and Matthew B. Stucky; Charles
Anthony Williams for Defendant and Respondent.
Plaintiff Merlin Lee Bergeron
operated a restaurant on property that he rented from defendant Clifton
Payne, Sr., under a written lease agreement.
Bergeron filed the instant action against Payne for
interference with contractual relationship based on Payne's alleged
unreasonable refusal to consent to Bergeron's assignment of the lease to a
third party who entered into a contract with Bergeron to purchase the
restaurant. After entering judgment on a
jury verdict awarding Bergeron compensatory and punitive damages, the court
granted Payne's motion for new trial on all issues. Bergeron appeals the order granting a new
trial, contending that the court abused its discretion by not limiting the new
trial to the issue of damages. We
affirm.
FACTUAL AND
PROCEDURAL BACKGROUND
In May
2005, Bergeron and Payne entered into a written commercial lease agreement
under which Bergeron leased business premises in San Diego from Payne for a
term of five years with options to extend the lease for three additional
five-year periods. Monthly rent was
$2,500 for the initial lease term and $2,750, plus a cost of living increase,
for the extended lease term. The lease
required Payne's express written consent for any assignment or subletting of
the lease. The lease also required
Payne's prior consent for any alterations or improvements to the premises.
Bergeron
paid between $164,000 and $200,000 in construction costs to convert the leased
premises to a restaurant. He also spent
about $52,000 for restaurant fixtures, $11,000 for a point of sale system, and
$12,500 for a liquor license. Approximately
18 months after signing the lease, Bergeron opened a restaurant named Lucky
Bucks on the premises.
Bergeron began to market the
restaurant in September 2008. In the
spring of 2009, he accepted an offer from Naomi Evans to purchase the
restaurant, including Bergeron's leasehold interest, plus "inventory of stock
in trade" for $163,000. Evans and
her husband Israel
deposited the full purchase price into escrow, paid $5,000 for transfer of the
restaurant's conditional liquor license, and began operating the
restaurant. They spent about $50,000
renovating the restaurant after they took it over. In the summer of 2009, Bergeron decided to
move to Spain
after he was diagnosed with a brain aneurysm and his doctor instructed him to
sell his business and relieve all stress in his life. In January 2010, Bergeron's friend Scott Rhude
began to act on Bergeron's behalf under a power of attorney to complete the
sale of the business.
The closing of escrow for the
restaurant sale was expressly contingent on Evans's obtaining an assignment of
the lease. Although Bergeron and Evans
executed an assignment and assumption of lease form on May 11, 2009, Payne did not fill out or sign the
section of the form that called for his written consent to the assignment. Beginning in June 2009, the Evanses delivered
monthly rent checks to Payne. However,
on the advice of his attorney, Payne did not cash the rent checks and
ultimately returned them because they were accompanied by written statements to
the effect that cashing them would constitute acceptance of Bergeron's
assignment of the lease to Evans. Payne
was reluctant to consent to the assignment because he had concerns about Naomi
Evans's credit score. He requested that
Israel Evans be a cotenant on the lease and that the Evanses submit a
"proper lease application" showing their assets and cash position.
A real estate agent involved in the
sale of the restaurant testified that Payne said he wanted to break the
existing lease so he could charge $1,100 more in rent to the new tenants. The Evanses offered Payne an additional $500
per month and were willing to accept a five-year lease term with one five-year
option, but Payne did not agree to those terms.
He requested that $53,000 be put into escrow to cover the cost of
returning the restaurant premises to its prior state at the end of the
lease. The parties and agents involved
in the sale ultimately offered to deposit $72,000 in escrow to meet Payne's
concerns, but he still refused to consent to the assignment. The Evanses cancelled escrow when their
temporary liquor license expired. Payne
took possession of the premises after obtaining a judgment in the amount of
$27,500 against Bergeron in an unlawful detainer action for nonpayment of rent.
Bergeron filed a complaint against
Payne alleging causes of action for breach of contract, intentional interference
with contractual relationship, and declaratory relief. In his cause of action for breach of
contract, Bergeron alleged that Payne breached the lease by unreasonably
withholding his consent to Bergeron's assignment of the lease to Evans. In his cause of action for intentional
interference with contractual relationship, Bergeron alleged that Payne's
unreasonable refusal to consent to the assignment disrupted the contractual
relationship between Bergeron and Evans.
He further alleged he was entitled to an award of punitive damages
because Payne's conduct was "willful, wanton and egregious, and done with
malice to spite [Bergeron] . . . ." Payne filed a cross-complaint against Bergeron,
alleging Bergeron breached the lease agreement by failing to timely pay rent
and failing to pay late fees for late rental payments; failing to pay a
security deposit; failing to timely pay real estate taxes for the premises;
making or permitting alterations and improvements to the premises without
Payne's prior written consent; and failing to maintain insurance on the
building and other improvements on the premises.
The case
was tried before a jury. In closing
argument, Bergeron's counsel told the jury that if it found Payne breached the
lease contract, it could award Bergeron "various contract damages aside
from the $163,000 that was the sale price of the restaurant." Counsel stated the jury could "also find
the unlawful detainer action filed against [Bergeron] was without merit
[b]ecause [Payne] himself rejected monthly, timely rent checks." Accordingly, counsel asked the jury to award
$42,500 for the unlawful detainer action, consisting of the judgment of $27,500
and attorney fees of $15,000 that Bergeron incurred in defending the
action. Counsel also asked the jury to
award Bergeron construction costs of $146,000, representing the difference
between the cost of the restaurant "build-out" ($309,000) and the
$163,000 sales price of the restaurant; $25,000 for Rhude's "expenses and
advances on behalf of Mr. Bergeron and his time[;]" and $11,000 in
additional attorney fees. Adding these
items of damages for the jury, counsel stated, "So that's approximately
$388,000."
The jury
returned a special verdict in Bergeron's favor, finding Payne breached the
lease contract and "intentionally interfered with Lee Bergeron's escrow
with Naomi Evans." The jury found
that Bergeron's damages were $388,000, the amount that Bergeron's counsel
requested in closing argument. The jury
further found that Payne acted with "malice or oppression." In a second phase of the trial to determine
the amount of punitive damages, the jury awarded Bergeron punitive damages
against Payne in the amount of $300,014.59.
The number 1459 is the street address number of the restaurant.
Payne moved
for a new trial and judgment notwithstanding the verdict (JNOV). In both motions, Payne argued that there was
no substantial evidence to support the verdict that he tortuously interfered
with Bergeron's contract with Evans because his actions, at most, amounted to a
breach of contract and not a tort. He
further argued there was insufficient evidence that he acted with malice to
support an award of punitive damages. In
his motion for new trial, Payne additionally contended the jury's award of
compensatory damages was excessive and not supported by
entitled to recover the sales price of the restaurant minus the value of the
restaurant equipment that his agent Rhude removed from the premises and the
value of the liquor license he retained.
Payne asked the trial court to "grant a new trial to correct the
jury's verdict that goes beyond the scope of the evidence adduced at
trial." Alternatively, Payne suggested
that the court "may grant a new trial subject to the condition that the
motion will be denied if Bergeron agrees to a substantial reduction in damages
in an amount [the] court deems fair and reasonable based on the evidence at
trial."
The court
issued a tentative ruling denying Payne's motion for JNOV and granting his
motion for new trial "on the complaint." Following oral argument on the motions, the
court issued an order granting Bergeron's request for leave to file a
supplemental letter brief. In his
supplemental brief, Bergeron defended the jury's economic damages award of
$388,000 and argued that if the court was still convinced that certain items of
damages included in the award were unjustified, the court should simply reduce
the award. Bergeron further argued that
if the court was inclined to grant a new trial, the trial should be limited to
the issue of economic damages for breach
of contract.
The court
issued a final order denying Payne's motion for JNOV and granting his motion
for new trial on the entire complaint.
The court found that "the amount of compensatory damages awarded
[Bergeron] by the jury is not supported by the evidence." The court stated: "Based on the jury's finding that [Payne]
breached the lease agreement by refusing to permit assignment of [Bergeron's]
lease to the Evans[es] and thereby intentionally interfering with the sale of
[Bergeron's] interest to the Evans[es], [Bergeron] lost the opportunity to sell
his business interest. The only damages
supported by the evidence presented would be the sale[s] price. The evidence indicates that the escrow
agreement reflected a sales price of $165,000. . . . [¶] On behalf of [Bergeron], evidence of
'damages' beyond the sale[s] price was introduced. For instance, [Bergeron's] counsel introduced
evidence of the $35,000 in attorney's fees incurred at the time of trial in
this action . . . , a $25,000 unlawful detainer action
judgment against [Bergeron] . . . , the $20,000 in attorney's
fees [Bergeron] incurred in the unlawful detainer
action . . . , as well as nearly $60,000 invested by the
Evans[es] beyond the sales price.
[Bergeron] also testified regarding permit fees he paid, as well as
costs of the improvements he made to the property over the life of the
lease. . . . [Bergeron]
also claimed damages for a person who was not even a party to the case (Mr.
Rhude)."
Noting that
Bergeron's counsel suggested to the jury that an appropriate award of
compensatory damages would be $388,000, the court stated: "The reasonable inference is that the
jury awarded Bergeron $388,000 in compensatory damages based on [counsel's]
instruction. [¶] Not only do the amounts
suggested by [Bergeron's] counsel not flow, legally speaking, from the breach
of contract, they do not fall within the permissible damages [for contract
interference], as they cannot be considered 'the pecuniary loss of the benefits
of the contract or prospective relation' or 'consequential losses for which the
interference is a legal cause.' Thus, to
the extent the jury relied on [counsel's] advice in closing and the testimony
on those points, any award of damages beyond the sale[s] price of $165,000 is
unsupported by the evidence and excessive." Later in its ruling the court added that
"[Bergeron's] counsel expressly told the jury to consider the improper
amounts discussed above in order [to] reach the $388,000 number. Under these circumstances, the conclusion is
unmistakable that the jury reached that number by relying on the improper
argument of [Bergeron's] counsel concerning damages to which [Bergeron] was not
entitled."
Regarding
the unlawful detainer judgment against Bergeron, the court stated: "For the jury to award [that amount] to
[Bergeron], the jury would have had to overrule the judge's ruling in the
[unlawful detainer] case and conclude [Bergeron] was the prevailing party in
that case. However, the jury never heard
all the facts of [that] case and never made a finding on the verdict form that
[Bergeron] should be a prevailing party in the unrelated case."
The court
concluded: "[B]ecause the jury's
award of $388,000 was excessive and based on improper matters, a new trial must
be granted on the complaint. [¶] While
partial new trial is appropriate when the issues of liability and damages are
severable, the Court grants an entire new trial based on its finding that the
issues of liability and damages are substantially interwoven. Moreover, the presentation of numerous claims
of damages that were not related to the case may have unduly inflamed the jury
and affected its liability determination."
Regarding Bergeron's request that the court reduce the damages instead
of granting a new trial, the court stated that "while the court is
normally amenable to this process, it cannot be done here. Punitive damages must bear some relationship
to the actual damages. It would be
impossible to know what the jury might have awarded in punitive damages[] if
they had awarded a substantially lesser amount of compensatory damages."
DISCUSSION
Bergeron
contends that the court abused its discretion by ordering a new trial on all
issues instead of a new trial on the issue of damages only.
"The power of a trial court to
grant a new trial as to some issues, while refusing it as to others,
is . . . well established.
[Citations.] 'The decision on
limiting a new trial to the issue of damages rests in the first instance in the
sound discretion of the trial judge. A
new trial limited to the damage issue may be ordered where it can be reasonably
said that the liability issue has been determined by the jury. An abuse of discretion must be shown `before
a reviewing court will reverse the trial judge's decision.' [Citations.]
[¶] [ ] [However, even when it
appears that the issue of liability was correctly determined, a new trial
limited to damages 'should be
granted . . . only if it is clear that no injustice will
result.
[Citations.] . . . [I]t has been held that a
request for such a trial should be considered with the utmost caution [citations]
and that any doubts should be resolved in
favor of granting a complete new trial.'
[Citation.] In short, 'When a
limited retrial might be prejudicial to either party, the failure to grant a
new trial on all of the issues is an abuse of discretion. [Citation.].]' " (Liodas
v. Sahadi (1977) 19 Cal.3d 278, 285-286, italics added.)
"Three factors of importance
in assessing the choice of limited new trial as opposed to entire new trial
are: (1) whether liability was clearly
established at the first trial[;] (2) whether the evidence concerning damages
was insufficient or entirely nonexistent; and (3) whether prejudice to a party
would result as the result of the choice of one disposition over the
other." (Tan Jay Internat., Ltd. v. Canadian Indemnity Co. (1988) 198
Cal.App.3d 695, 705.) A new trial on all
issues is appropriate if there are circumstances that indicate the verdict was
the result of prejudice and the question of liability is close. (Hamasaki
v. Flotho (1952) 39 Cal.2d 602, 604-605.)
In the
present case, we cannot conclude the trial court abused its discretion in
ordering a new trial on all issues. The
improper items of damages that the jury assessed at counsel's urging resulted
in an excessive compensatory damages award, which itself might have affected
the jury's liability findings. (See
70 Cal.2d 311, 316, fn. 2 [excessive damages resulting from prejudice or
passion may affect the issue of liability and cannot be cured by a
remittitur].) It was not unreasonable
for the court to conclude that the issues of liability and damages were
"substantially interwoven" and that "the presentation of
numerous claims of damages that were not related to the case may have unduly
inflamed the jury and affected its liability determination." For example, the court reasonably could have
been concerned that the jury based its liability determination in part on
Payne's conduct that caused Rhude to incur the $25,000 in "expenses and
advances." Following Bergeron's counsel's
cue, the jury awarded those expenses and advances to Bergeron as damages. The
court concluded those damages were improper because they were losses suffered
by Rhude rather than Bergeron. The court could reasonably be concerned that
inflating the damages award with items that are not allowed by law may have
unduly inflamed the jury and influenced its liability determination. "The trial court is in a far better
position than an appellate court to determine whether a damage award was
influenced by 'passion or prejudice.'
[Citation.] In reviewing that
issue, . . . the trial court is vested with the power,
denied to us, to weigh the evidence and resolve issues of
credibility." (Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 919.) Because the trial court was reasonably
concerned that the "improper claims of damages" may have affected the
jury's liability determination, the court did not abuse its discretion in
concluding that neither a new trial limited to the issue of damages nor a
remittitur was appropriate.
Further,
notwithstanding the jury's liability findings and obvious dislike of Payne, the
court could reasonably view the question of Payne's liability for breach of
contract as close in light of the unlawful detainer judgment
under the lease Payne was charged with breaching. As noted, if the question of liability is
close, it is an abuse of discretion to grant a new trial limited to the issue
of damages. (Hamasaki v. Flotho, supra, 39 Cal.2d at pp. 604-605.)
Finally, it
was not an abuse of discretion to order a new trial on the issue of punitive
damages because the amount of compensatory damages awarded is a factor relevant
to the assessment of punitive damages. (
Cal.4th 405, 417.) Accordingly, the
court properly ruled that a remittitur or limited new trial was not appropriate
because, in the court's words, "[p]unitive damages must bear some
relationship to the actual damages[,] and "[i]t would be impossible to
know what the jury might have awarded in punitive damages[] if they had awarded
a substantially lesser amount of compensatory damages."
DISPOSITION
The order
granting a new trial on all issues is affirmed.
Payne is awarded his costs on appeal.
BENKE, Acting P. J.
WE CONCUR:
McINTYRE, J.
O'ROURKE, J.
this court observed, "The power of the trial court is singularly at its
greatest in deciding whether to grant a new trial, leaving the appellate court
virtually powerless to reinstate a most reasonable jury verdict." (Candido
v. Huitt (1984) 151 Cal.App.3d 918, 924 (conc. opn. of Brown, J.).)
